Medicare enrollment demystified: 10 things you must know before signing up

Medicare enrollment demystified

Since 1965 when President Lyndon Johnson signed it into law, Medicare has become so complicated that several books explaining the program’s intricacies have been published, from “Medicare for Dummies” to “Making the Most of Medicare: A Guide for Baby Boomers” to the new “Get What’s Yours for Medicare” by Philip Moeller.

“Medicare should be a transparent and easy-to-use program but has evolved into an opaque, complex and forbidding entity that totally confuses many seniors and their families,” says Moeller.

Time is almost up for the current enrollment period for Medicare. Wednesday, Dec. 7 is the last day for seniors already in the program to change their Medicare Advantage or Part D prescription drug plans.

The other enrollment periods are:

Jan. 1-March 31: Each year, seniors who overlooked enrolling in the period around their 65th birthday can sign up for Part A and/or Part B.

Jan. 1-Feb. 14: This marks a “disenrollment period,” when seniors can switch from Medicare Advantage to original Medicare.

Bankrate checked with Moeller and other insurance experts to shed some light on the many parts of this important health care program for seniors. We also provide several online resources where you can learn more.

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You won’t get notified of eligibility

Medicare, like most government departments, is not exactly over-staffed. Its personnel will not necessarily invite you in for a chat when the time is right. If you are already receiving Social Security retirement income at the time you turn 65, you might get a notice about Medicare. But don’t count on it. Ultimately, it’s up to you to remember.

Your initial Medicare enrollment period spans seven months: from three months before your 65th birthday month until three months after. So if you are younger than 65, go ahead and mark your 65th birthday on the calendar, along with a note to start your registration process two or three 3 months in advance.

Medicare doesn’t cover everything

“Medicare is decent insurance but has significant gaps, especially if you have a prolonged hospital stay in your life,” says David Winkler, a wealth planner with Cornerstone Wealth Management in San Ramon, California, and an insurance instructor at UC Berkeley. “The combination of Medicare plus Medigap insurance (offered by private insurers) or Medicare Part C (also known as Medicare Advantage) is essential.”

Both Medicare Advantage and Medigap help with copays and deductibles. While Medicare Advantage has become more popular because premiums are generally lower, critics say Advantage plans have higher potential out-of-pocket costs. It behooves new enrollees to learn as much as possible about the different ways to manage health care expenses before making a decision.

Does Medicare cover dental, vision and hearing coverage? “Broadly speaking, nope, nope, and nope,” notes Moeller, adding that some Medicare Advantage plans do offer some coverage for these services.

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Medicare is not free

If you’re tired of the cost of private health insurance or you’re staying in a job you’d rather leave just because you need the employer-provided health benefits, it’s great to reach age 65 and have Medicare relieve some of those burdens. But don’t expect to be home free.

In a presentation about the costs of Medicare, certified financial planner James Foster, director of the Advanced Planning Group at Prudential Annuities, said that a married couple on Medicare should budget about $11,000 per year just to cover premiums for Part B (medical), Part D (prescription drugs), and Medigap, plus copays and some basic hearing, vision and dental expenses. And that’s for the good times — before anyone has a serious illness or accident.

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Don’t enroll late for Parts B and D

Parts B and D carry significant penalties for late enrollees. If you’re still working when you turn 65 and your employer’s health insurance provides benefits at least as good as those offered by Medicare, you don’t have to enroll in B and D right away. But make sure you have a “Certificate of Creditable Coverage” to prove you were eligible for the delay.

Otherwise, when you do enroll in Part B, you will pay an extra 10 percent per year for every year that you could have had Part B but didn’t. And for late enrollment in Part D, the penalty is 1 percent of the premium per month. Both of these penalties, by the way, amount to higher premiums that you will pay for the rest of your life.

COBRA doesn’t count

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, is the law that protects workers who want to stay on their former employers’ health plans at their own expense after leaving their jobs. Having COBRA insurance, however, does not mean you can put off signing up for Medicare.

To avoid penalties for late enrollment in Medicare, you must be on an active employer group plan. In other words, you must be still working for the employer who is providing your insurance. If you are lucky enough to be getting retiree health benefits, or you are on COBRA, you are not “active” — and that means you may be in for late-enrollee penalties when you eventually join Medicare, according to Moeller, even though you were covered by a good plan in the interim.

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Work for a small employer? Enroll in Medicare

The same holds true for people in a small employer plan — one with fewer than 20 people.

Moeller says that employees at small workplaces must enroll in Medicare when they turn 65. That’s because the group plan will stop being the primary payer of insurance claims; it will take a back seat to Medicare, which becomes the primary insurer.

It’s great to have both, Moeller adds, since your employer insurance can still help cover deductibles, copays and other costs.

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Medicare is individualized

Take this into consideration: Your spouse and children cannot follow you onto a Medicare plan. This is important to note if you’re covering family members through your current health plan. You can’t put dependents on your Medicare policy, so unless everybody you’re covering is also eligible for Medicare, you’d better keep the private plan, too.

Change is good

You can — and probably should — make changes to your plans from time to time.

“It is prudent for people to reassess their drug plans (Part D) every year. It’s a one-year contract. Premiums change, and your drugs change,” says James A. Holt, a health insurance broker in Walnut Creek, California.

Finding the right drug plan has gotten easier. Although in her book, “The Art of Choosing,” the social psychologist Sheena Iyengar once cited Medicare Part D, with its 63-odd different plans, as the ultimate example of choice overload, Holt points out that Medicare.gov now provides a tool for this. You just enter your ZIP code, the medications you take and your favorite pharmacy, and it generates a list of appropriate Part D plans, complete with costs, so you can make an educated comparison.

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